Priscilla Muthoora Thakoor: Supervision of Climate Risks

Why It Matters

Linking climate‑risk oversight to financial stability forces banks to close a critical financing gap, protecting Mauritius’ economy from climate‑driven shocks.

Key Takeaways

• Bank of Mauritius guideline effective Jan 2024 sets climate risk expectations
• Banks' green loan share remains low despite modest growth
• Technical assistance from Banque de France enhances supervisory climate modelling
• Over 70% of $213 M annual finance gap could be bank‑funded
• Climate‑risk scenario analysis launched to gauge credit loss exposure

Pulse Analysis

Globally, central banks are embedding climate risk into supervisory practice as extreme weather intensifies. Mauritius, a small island nation, faces heightened exposure to cyclones, sea‑level rise and heatwaves, prompting the World Bank’s CCDR to forecast up to a 10 % GDP contraction under compound shocks. In response, the Bank of Mauritius has created a Climate Change Centre and issued a 2024 guideline that obliges banks to integrate climate considerations, disclose exposures, and pursue low‑carbon lending. This regulatory push aligns with a broader trend where monetary authorities view climate resilience as a core component of macro‑prudential stability.

The recent workshop, supported by technical assistance from the Banque de France, marks a practical step toward operationalising those policies. The central bank’s inaugural climate‑scenario analysis evaluates potential credit losses under two plausible pathways, while on‑site examinations will soon test banks’ compliance with the new expectations. Capacity‑building efforts focus on climate‑modelling expertise, data‑gap mitigation, and the development of a green‑taxonomy framework. Simultaneously, Mauritius is preparing to adopt the International Sustainability Standards Board (ISSB) disclosures, which will standardise reporting and improve market transparency for climate‑related assets.

For the private sector, the stakes are clear: the CCDR estimates a $213 million annual climate‑finance shortfall, with more than 70 % of that gap expected to be filled by banks. Although green loan portfolios have grown, they remain a modest slice of total credit. A robust taxonomy, clear de‑risking mechanisms, and reliable climate data are essential to unlock this capital. By aligning regulatory incentives with market demand, Mauritius aims to transform its banking system into a catalyst for sustainable development, ensuring both economic resilience and progress toward its NDC 3.0 climate targets.